[BREAKING]: SEC Denies All Direxion Bitcoin ETF Proposals Stating Many Reasons
Specifically, the SEC decided to disapprove a proposed rule change to the latest Bitcoin ETF:
“related to listing and trading of the Direxion Daily Bitcoin Bear 1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and Direxion Daily Bitcoin 2X Bear Shares.”
The proposed exchange-traded products would have traded on NYSE Arca.
On January 4, 2018, NYSE Arca filed a request with the SEC to change a rule. The SEC originally delayed the decision on the proposed rule change. The organization had until September 21, 2018 to approve or deny the ETFs and their proposed rule change, but the SEC has decided to deny the funds as of August 22.
The SEC had originally delayed approval in March 2018.
The crypto community has been buzzing this week about the potential approval of the world’s first bitcoin ETF. The SEC needs to make a decision on the ProShares bitcoin ETF before Thursday of this week.
This is not the ProShares ETF. These are the Direxion ETFs, which were also known to be making their way through the SEC regulatory process.
In other words, we could have a ProShares ETF approved before the end of this week. The disapproval of the Direxion ETF products doesn’t change that.
The SEC’s denial contains some optimistic information for bitcoin and crypto in general:
“This order disapproves the proposed rule change. Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.”
Instead, the SEC emphasized that it was disapproving the rule change because it failed to meet a certain regulation under the Exchange Act and the Commission’s Rules of Practice:
“Among other things, the exchange has offered no record evidence to demonstrate that bitcoin futures markets are “markets of significant size,”” explains the SEC. “That failure is critical because, as explained below, the exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary to satisfy the statutory requirement that the exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
The denial document goes into further detail about how the proposed Direxion bitcoin ETFs would have worked.
Each of the funds had multipliers in their name – like the 1.25X Bull Fund and the 2X Bear Fund. These numbers indicated the types of daily investment returns the funds were expecting. In the case of the “Bull Funds”, the goal was to beat daily returns by 125% of the target benchmark. In the case of the Bear Funds, the goal was to seek “daily inverse investment results (before fees and expenses) that are -100% or -200%, respectively, of the daily return of the target benchmark.”
You can view the full rejection notice by the Securities and Exchange Commission here. As mentioned above, this is not the ProShares ETF decision that was initially expected for this week: this is a different ETF that was scheduled for approval or denial before September 2018. Word is on the street that the ProShares bitcoin ETF was denied as well in which we will talk about in a new post we are working on right now.